Lawmakers and tribal leaders are intensifying efforts to regulate prediction markets, citing concerns over consumer protection, tax fairness, and the impact on licensed operators.
At a recent National Council of Legislators from Gaming States (NCLGS) meeting in San Diego, Shawn Fluharty, president of the council and West Virginia legislator, addressed the growing challenges prediction markets pose to regulated gaming territories. These platforms, which allow users to trade on outcomes of events, including sports, have expanded rapidly but often operate outside traditional state licensing frameworks.
Fluharty warned that if the US Supreme Court rules against federal regulation of prediction markets, these companies will likely intensify lobbying efforts at the state level to secure approval without following established licensing and regulatory processes. “Then prediction markets are on the ground lobbying to clear out their own lane,“ he said, indicating that these operators may avoid the rigorous legislative and regulatory scrutiny that licensed sports betting providers undergo.
One key concern is the lower tax rates applied to prediction markets compared to traditional sports betting. For example, North Carolina recently approved prediction markets with a 6% tax on net trading-fee revenue, bypassing state licensing requirements. This contrasts sharply with the state’s online sports betting tax rate, which recently increased to 23%. Fluharty described this disparity as “revenue theft from states.” Former White House official Mick Mulvaney has also noted that North Carolina has potentially left over $100 million in tax revenue uncollected due to this tax gap.
Players and bettors should be aware that prediction markets may not be subject to the same consumer protections as licensed operators. Fluharty highlighted that some prediction markets do not consistently enforce age restrictions, potentially exposing younger individuals aged 18 to 20 to gambling risks that regulated markets guard against by requiring participants to be 21 or older. This raises concerns about predatory practices and the safety of vulnerable consumers.
Licensed operators who comply with state regulations invest heavily in technology, licensing fees, and responsible gambling measures. The disruption caused by unregulated prediction markets threatens the stability and fairness of the regulated market environment, potentially confusing consumers about what is legal and safe. Fluharty stressed the importance of protecting these licensees who have committed resources and efforts to operate within the law.
Fluharty also noted the public confusion surrounding the legality of prediction markets versus licensed sports betting. He emphasized the need for the regulated industry to educate consumers on these distinctions to prevent harm and maintain trust. Lawmakers are preparing for increased lobbying from prediction market companies, which have already begun efforts at the state level to hedge their bets in case of an unfavorable Supreme Court ruling.
For players, this evolving regulatory battle means staying informed about the legal status of the platforms they use and understanding the protections—or lack thereof—that apply. Consumers should exercise caution with prediction markets that operate outside state licensing, as these may not offer the same level of oversight or responsible gambling support.
More details on this issue are available from the CDC Gaming report. For broader context on sports betting regulation and player protection, visit our USA and Sports Betting sections.
Additional industry insights can be found in related coverage such as the analysis of Las Vegas and Macau gaming trends and the Caesars 2025 Corporate Social Responsibility Report, which highlight ongoing developments in the gaming sector.
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